SUSTAINABILITY
REPORT 2016

CORPORATE SOCIAL RESPONSABILITY

SUSTAINABILITY REPORT 2016

Corporate Social Responsibility

at Cargolux

Recognizing its responsibility as an airline, Cargolux has, for a long time, sought to raise the awareness for environmental issues amongst its staff and has committed to lessen the impact of its activities on the environment as much as possible.

To this end, the company has, on one hand, introduced measure for energy savings, recycling and waste reduction at its offices and facilities and, on the other hand, acquired modern, fuel-efficient and quiet aircraft for its fleet.

In 2016, the airline completed its fleet rollover program with the delivery of its 14th new 747-8F, an aircraft type that is more fuel efficient and produces lower noise disturbances during take-off and landing than its direct predecessor, the 747-400F, itself still one of the quietest and most efficient aircraft in its class.

Not stopping here, Cargolux has initiated its Fuel Efficiency Round Table, a project that aims to identify areas of inefficient fuel usage and to implement change towards a more efficient and conscious fuel usage. Round Table has an economic goal (cutting costs) but also an ecological objective (less fuel consumption equals less CO2 emissions). In Flight Operations, the initiative saved 2,000 tons of fuel during 2016 and reduced CO2emissions by 6,398 tons.

In June 2016, the company’s environmental efforts were validated as Cargolux, true to its pioneering spirit, became the first airline worldwide to be honored with the Lean & Green award. The airline was recognized for its commitment to improve its carbon efficiency by 10% within five years.

Lean & Green was started in 2008 as an initiative of the Dutch Ministry for Infrastructure and Environment to reduce the carbon footprints of companies. Today, Lean & Green Europe is Europe’s leading community for sustainable logistics. Lean & Green Europe combines corporate responsibility for reducing footprints with continuous improvement of operational performance and value for customers.

Until recently, logistics was perceived as a low-skill industry associated with a history of emissions and noise pollution. Due to the rapid introduction of green technologies, advanced automation, software systems and high-tech advances in warehousing and tracking systems, as well as more collaboration in the supply chain, this perception is now outdated. Lean & Green Europe, with its award, recognized that Cargolux successfully faced the challenge of finding a healthy balance between environmental and economic concerns. The airline’s customers and logistics partners, the major forwarders of this world, are well aware of the Lean & Green program and appreciate Cargolux’s efforts. Being Lean & Green certainly gives Cargolux a competitive advantage and underlines its commitment to always deliver the highest service excellence.

Cargolux considers itself an ambassador for the Grand Duchy of Luxembourg and is deeply rooted in the country since its inception in 1970. The airline has developed strong ties with local communes and organizations, adding to Luxembourg’s economic strength with signifcant contributions in 2016. The company’s commitment also extends to promoting cultural and sports activities, as well as education, research and the support of humanitarian NGOs.

FIRST LEAN & GREENAIRLINE WORLDWIDE

IN THE TOP 10OF LUXEMBOURG’SMOST ATTRACTIVEEMPLOYERS

With a growing workforce of 1,389 people inLuxembourg at the end of 2016 and having created thousands of jobs in other industries directly related to its air freight activities at Luxembourg airport, Cargolux ranks in the top ten of Luxembourg’s most attractive employers. Worldwide, the airline employed 1,856 people at the end of 2016.

Progress in 2016

Cargolux sees a growing commitment for environmental and social awareness, both among its staff on one hand and customers and the industry on the other hand. This continues to contribute positively to the actions and programs the company has in place ; programs that have been recognized by authorizations and organizations alike as shown by awards, such as Lean & Green, or labels, such as ‘Superdreckskescht fir Betriber’. Cargolux strives to continuously expand its engagement towards the environment, its neighbors and the people whose livelihood rely on the economic success of the company.

CSR Goals: Committed
to Sustainability

Cargolux’s CSR program focusses on four areas of priority for its business. Each area is driven by specific commitments, goals and targets that involve all stakeholders within the company. The CSR program supports the company’s vision as the Global Cargo Carrier of Choice

The CSR program is composed of four main pillars: Environment, People, Communities and Customers.

ECOVADIS

In 2016, Cargolux achieved Ecovadis’
Gold Rating status.

Ecovadis provides a solution for the monitoring of sustainability in global supply chains ; Cargolux is one of the companies audited by Ecovadis.

This produces a reliable assessment of the air­line’s corporate social responsibility performance through comprehensive feedback, benchmarks and tools. Its methodology is based on sustainable development standards of the Global Reporting Initiative GRI, the United Nations Global Compact and ISO 26 000.

Stakeholder Engagement and Materiality

a) Stakeholder list and engagement

Stakeholders play an important role in Cargolux’s activities and affect the company’s business in a number of ways. Cargolux employs various means to interact with its stakeholders, all the while maintaining transparency and an open dialogue. Cargolux’s stake­holders include shareholders, employees, customers, investors and suppliers. They extend to the commu­nities potentially affected by the company’s activities, primarily those around the airport of Luxembourg, its primary operational hub. Finally, they also include government and local authorities, national and industrial representations, non-governmental organizations and auditing bodies.

The airline has adopted various means of commu­nication to address its stakeholders, inform about developments and learn about opinions and ideas. These comprise:Externally : Cargolux continued and elaborated the exchanges in direct dialogue and written feedback, direct representation, events, company website and social media platforms, customer magazine and media. Representatives of the company regularly participate in a number of working groups in leading industry associations such as IATA, TIACA and A4E.Internally:Emphasis was put on the exchange and dialogue with internal stakeholders: a new Intranet was launched, improving accessibility to internal information for the entire staff. Exchanges take place via direct dialogue, the Intranet, staff newsletter and staff events. As part of a project focusing on company culture, a survey was performed amongst employees to better understand their view on Cargolux’s values and culture. Under the auspices of the project, a cross-divisional working group was formed to provide ideas and feedback for further enhancing internal communications.

b) Materiality Matrix

The company’s CSR program was developed over the last couple of years, in line with the development of its business and with the input from the stakeholders. However, the identification and prioritization of key CSR issues remains an ongoing process that continuously evolves and provides a growing platform for stakeholder consultations. Without continuous development, the program would come to a standstill.

The airfreight industry has fought a myriad of challenges and difficult conditions for a number of years. It is an increasingly difficult environment for maintaining a financially sustainable operation that also respects the demands and needs of its stakeholders. Yet, despite the challenges, Cargolux has been eager to uphold its commitment to Corporate Social Responsibility.

AT A GLANCE

Key figures

1,856 staff worldwide

7,550 million tonne-kilometers flown

26 aircraft – biggest fleet in the company history. 12 Boeing 747-400Fs and 14 Boeing 747-8Fs

Europe’s biggest all-cargo airline; 6th worldwide, based on FTKs

First GDP certified airline worldwide

First Lean & Green certified airline worldwide

Complementary hub in Zhengzhou, China, more than 100,000 tonnes of freight flown in 2016

13:27 hours average daily aircraft utilization

About the company

Cargolux Airlines International S.A. is a leading global all-cargo airline, based in Luxembourg, operating a fleet of modern Boeing 747-8 and 747-400 freighters. It provides air freight transport services to freight forwarders in most parts of the world through scheduled and charter flights.

This includes the regular transportation of perishables, temperature and shock-sensitive goods, supply-chain goods, project cargo, finished commodities and live animals on its worldwide network that covers some 90 destinations. The company has developed a unique expertise in the handling of fragile and also outsized commodities that require increasingly sophisticated logistics and Cargolux’s highly trained and dedicated staff guarantees the best possible service to customers.

Cargolux also offers third-party maintenance services at its maintenance center in Luxembourg. The company is specialized in Boeing 747 line and hangar maintenance up to and including C-Checks. Its service offering includes a range of specialized maintenance services such as, but not limited to, avionic modifications, structural repairs and worldwide AOG support.

Innovative concepts and the constant drive for quality have earned Cargolux a number of awards throughout the years. Among the awards that Cargolux received in 2016 were the ‘Best All-Cargo Airline– Europe Award’ from trade magazine Transport News as well as the ‘2016 Logistics Management Quest for Quality’ award in the ‘air cargo carriers’ category.

WORLDWIDE NETWORKTHAT COVERS SOME90 DESTINATIONS

Operational structure of the organization

Commercial Planning

Corporate Development

Corporate Services

Finance and Administration

Flight Operations

Global Logistics

Human Resources, Legal Affairs and Compliance

Maintenance and Engineering

Sales & Marketing

Industry Associations and Organizations

UN Global Compact

Cargolux is committed to operating and acting in a socially and environmentally responsible manner and has underpinned this commitment in 2007 when it signed up to the UN Global Compact, pledging to apply its 10 key principles.

Corporate Charter for Social Responsibility and Sustainable Development

Already in 2005, Cargolux signed the Corporate Charter for Social Responsibility and Sustainable Development, an initiative launched by the Luxembourg Chamber
of Commerce.

IATA

The International Air Transport Association (IATA) is the trade association for the world’s airlines, representing some 265 airlines or 83% of total air traffic. It supports many areas of aviation activity and helps to formulate industry policy on critical aviation issues.

Cargolux is member of IATA’s Air Cargo Carbon Footprint (ACCF) working group.

TIACA

The International Air Cargo Association (TIACA) represents, supports, informs and connects every element of the global air freight supply chain.
The organization provides a unifying voice for the industry, works for global standards and raises the profile of air cargo.

Airlines for Europe (A4E)

At the end of 2016 Cargolux joined A4E, which has become Europe’s largest airline association, based in Brussels. A4E represents the interest of its airline members and their customers in a number of policy areas including a reform of European air traffic management framework, aviation emissions trading schemes, security issues and aviation taxes.

Cargo iQ

Cargo iQ is the new name of the former Cargo 2000 initiative, a joint effort by a group of airlines and forwarders (members) that, today, is an IATA interest group aiming at improving the work processes in the air cargo transportation from shipper-through-to-the-consignee (end-to-end).

SAFUG

Cargolux is a founding member of SAFUG (Sustainable Aviation Fuel Users Group), a cross-industry initiative that aims at promoting and bringing onto the market sustainable aviation biofuels.

The Safety Management System is overseen by a dedicated team of investigators, analysts, risk management and safety experts, who directly report to the accountable manager. Additionally, safety critical issues are quickly addressed through direct communication between the aviation safety department and the responsible proves owners.

The SMS includes pro-active and re-active safety reporting, flight data monitoring, hazard identification, risk management and management of change procedures. These and other elements are used to identify and mitigate potential safety related issues, thus keeping risks within acceptable levels, as low as reasonable possible.

The Cargolux Safety Review Board (SRB), the airline’s highest governance body for safety-related issues, comprises all nominated persons, as required by EASA. The board regularly meets to analyze and advance the operational safety performance of Cargolux.

A number of safety performance indicators measure the effectiveness of safety barriers. These indicators are regularly presented to the process owners, as well as the SRB, to analyze potential problem areas and take pro-active risk control action.

All safety and risk management processes are documented in Cargolux’s Management System Manual and are mandatory for all operational stake holders.
The manual is approved by the Luxembourg Civil Aviation Authority (DAC).

The organization has recognized crew fatigue as a safety issue that needs to be monitored. Consequently, Cargolux has established a Fatigue Risk Monitoring System (FRMS) as part of its SMS, using recommended practices based on ICAO guidelines. A dedicated group of FRMS Safety Officers, pilots’ representatives and flight operations management meets regularly to discuss fatigue-related issues and recommend to management processes and procedures to reduce and/or control crew fatigue.

Over 1,500 safety reports where submitted in 2016, including Air Safety, Maintenance Safety, Ground Safety and Fatigue Reports. These where all processes as per the Management System procedures. A steadily growing rate of pro-active reports enabled the airline to take actions before hazards become an event.

Several of the Cargolux Aviation Safety Department members are involved in safety industry groups and contribute to generating best practices that can then be implemented within Cargolux. These groups include amongst others, EASA CAT-CAT (Civil Aviation Collaborative Analysis Group), the IATA Safety Group, the IATA Hazard Identification Task Force, and the EASA European Operators Flight Data Monitoring Initiative.

Ethics and Compliance

Cargolux, as a leading supplier of high-quality air cargo services to customers around the world, works in a variety of cultures. The airline has committed to support and strengthen an ethical business culture that promotes compliance with all applicable laws and regulations, as well as adherence to internal rules and policies. An ethical corporate, as well as individual, attitude fosters sustainable and profitable long-term business relations built on trust and avoids the risk of reputational or financial damage.

Since 2010, Cargolux has a strong, comprehensive compliance program in place that safeguards the company’s business and assets and protects its employees by enabling them to better identify ethical challenges and giving them the tools to handle these adequately. The program, managed by a dedicated compliance department, involves all divisions of Cargolux and is actively supported by the company management.

It is based on a string of policies and conduct guidelines for personal and business behavior and supplemented by training schedules, communication initiatives and a compliance management system.

Cargolux has a compliance training program in place that incorporates online and classroom sessions, with recurring refresher training at regular intervals. It introduces the company’s legal obligations, values and ethical principles to all employees, sales agents and legal representatives worldwide.

Cargolux’s compliance classroom training program works in cycles lasting three years. In 2016, the company conducted a total of 2,336 hours of training for its employees and contractors. 698 Cargolux employees went through a compliance training in addition to 14 external trainees and 91 GHAs and GSAs. Topics included anti-bribery and anti-corruption, competition law, conflicts of interests, data protection and more.

Comprehensive procedures, as well as manual and electronic controlling systems ensure full compliance with embargoes applicable to individual countries. A targeted training imparts special procedures for shipping goods to restricted countries and enables Cargolux staff to ensure that the airline does not violate embargoes.

Cargolux has tasked a specialized, independent external organization with running a confidential reporting system. This enables individuals to report potential misconduct in complete confidentiality and helps Cargolux to uncover potential breaches of laws, internal rules or procedures and to prevent reoccurrences.

The company’s own Compliance Consultation Desk aims to accurately and quickly respond to employees’ questions regarding applicable rules and their interpretation. It has seen continuous growth in the number of submitted questions since its launch a few years ago, which demonstrates the increasing risk awareness of employees.

Cargolux deals with a number of business partners and suppliers worldwide. In order to ensure that these companies work according to its business ethics and compliance principles, the company performs due diligence on partners classified as medium and high risk. This risk classification is country specific according to a corruption perception index and is also based on the type of services rendered.

Cargolux is based in a country with very high standards in respect of the observance of human rights. Human rights issues therefore play a minor role in the company’s daily business at its home base. However, Cargolux’s service level agreements require that its partners and suppliers also comply with its values and ethics code and observe human rights in their business activities.

GENERAL DISCLOSURES – PEOPLE

Disclosure on management approach

Cargolux gives high importance on building and nurturing mutually beneficial long-term relationships with its employees. The reputation and success of Cargolux is built on the team spirit and family-like atmosphere among the staff that was instrumental in the company’s growth and prosperity.

The number of employees worldwide increased from 1,779 to 1,856 at the end of 2016. The majority of employees in Luxembourg (64.6%) are hired on full-time contracts governed by an advantageous collective work agreement, which provides protection and advantages to employees beyond those afforded by law. In addition, the company offers a range of attractive fringe benefits.

In total, Cargolux HR processed 6,590 applications and recruited 207 persons during 2016; this includes apprentices, trainees and pilots, both temporary and firm.

In other projects for 2016, The Cargolux HR Department introduced

the “Connecting Flights” project, focusing on core values and strengthening the Cargolux Spirit;

a worldwide appraisal and career development plan for managerial employees worldwide;

an HR business partner/business coordinator set-upto assist the divisions in their people-oriented processes and projects;

From its very beginnings as a one-airplane charter airline to the largest all-cargo carrier in Europe today, Cargolux has always been viewed as a pioneer in the airfreight industry. Its successful climb to the top was driven by flexibility to changing market demands, the ability to grasp opportunities whenever they come and the will to explore new ways of doing business. In short, Cargolux has grown by constantly adapting its view on the air cargo industry and adjusting its strategy accordingly. Or, in other words, the people of Cargolux have consis­tently embraced change.

Throughout its existence, Cargolux has seen itself as a people-driven company powered by its most valuable asset, its employees. The staff turnover rate remains at a remarkably low level at 6.7% in 2016 and is an encouraging sign of the loyalty the employees place in Cargolux. Building on this commitment and dedication, the company continues to invest in a number of talent management activities that include initiatives such as succession planning in order to better recognize, develop and retain its high potentials.

In addition, these measures contribute to giving emp­loyees clearly defined career paths and development opportunities. Cargolux believes that its skilled and highly motivated employees are the basis for a strong and sustainable economic future. Employees that feel content, safe and secure in their work environment also best understand that, in order to move the company forward and to build tomorrow’s success, they need to constantly adapt their actions and behavior to be aligned with the organization’s values and vision, to effectively and actively contribute to a culture that, ultimately, creates business opportunities, has a positive impact on customer relations and, at the same time, also gives individual job satisfaction.

A positive culture can make all the difference for a company in a challenging business environment dominated by fierce competition, overcapacity andlow yields. It separates the strong players from the weak. It is a delicate balancing act between often competing interests. Yet, it is worth paying attention to, because a strong culture aligned with the organization’s ambitions is an essential element of a company’s long-term success and sustainability.

Cargolux has started addressing this challenge with the launch of its ‘Connecting Flights’ project during 2016. ‘Connecting Flights’ encourages a close cooperation and open dialogue between all employees, working together to boost the Cargolux Spirit and to support the airline’s vision of being the ‘Global Cargo Carrier of Choice’.

Within only a few months after the launch of‘Connecting Flights’ in August 2016, the volunteer teams have laid some solid groundwork and identified a number of improvement opportunities to work on. ‘Connecting Flights’, in a collaborative effort, helps to shape the company’s future and to strengthen the spirit that made Cargolux big and successful.

A culture change is an ongoing process and it takes time. It takes a ‘working-together’ ethic and a common effort that puts the company’s long-term stability and interests first. Changing some isolated values does not make a culture change. Companies that understand this are in the best position to succeed in face of future business challenges. Cargolux continues its ‘Connecting Flights’ journey in 2017.

STAFF & EMPLOYMENT

At a glance

Total number of employees 1,856: 4.3% increase in staff throughout the Cargolux network

Diversity: 5,4% more women compared to the previous year, overall 20% of Cargolux employees are female

Cargolux employs people from 65 nations throughout the network, 44 in Luxembourg

Seventh most attractive employer in Luxembourg

Vision mission and spirit

Cargolux continues to focus on achieving its vision to be the Global Cargo Carrier of Choice. The airline aims to build on its strengths in order to be the preferred partner for its customers, suppliers and service providers as well as its current and future employees, not only at its Luxembourg home base but, underpinned by an extensive global network, all around the world.

As the Global Cargo Carrier of Choice, Cargolux’s mission is to deliver consistent flexibility and relia­bility through its valued and dedicated employees, creating sustainable benefits for all stakeholders in a safe environment.

In working towards realizing its strategic ambitions in an ever more competitive market environment, the airline has decided to place an even stronger emphasis on reinforcing its key values, which make up the Cargolux Spirit. The eight core values are the hallmark of Cargolux’s success and act as the key guiding principles for the company’s employees in their day-to-day actions in bringing the airline’s mission to life. These values are at the center ofthe ‘Connecting Flights’ project, launched in 2016, which is aimed at reshaping the company’s culture and revitalizing the Cargolux Spirit to serve as the foundation for an even stronger, more agile and forward-looking global team, united by common values. This project is closely aligned with other strategic talent management initiatives such as succession planning, clarification of career paths and placing more emphasis on talent development activities, including management and leadership trainings.

‘Connecting Flights’ also aims to provide a platform for tapping into the creativity and drive of employees all over the organization in order to bring about improvements and new ideas in open, collaborative cross-divisional working groups established outside the traditional hierarchical structures. These initiatives are expected to enhance the outcomes of the recently launched business process re-engineering project, which aims at further improving the efficiency and excellence of Cargolux’s business activities.

‘Connecting Flights’

improves the efficiency and excellence of

Cargolux’s business activities.

Training and Development

Corporate training constitutes the second major pillar in Cargolux’s training activities, next to Flight Training. Training at Cargolux covers two areas:

a) Mandatory courses for all staff, e.g.: for pilots and mechanics to maintain and/or upgrade their license. This also covers training on new equipment, new technologies or the application of new procedures. This type of training is a legal requirement.

b) Various types of training for staff that allows them to acquire new skills and develop their areas of competence and expertise. This type of training extends beyond legal requirements and constitutes a voluntary action on behalf of Cargolux.

Owing to the many regulations and high standards within the aviation industry, Cargolux follows a well- established training philosophy that has made training and development one of the company’s greatest strengths. Cargolux offers a great variety of voluntary personal development courses beyond regulatory and mandatory training. The company strives to foster a culture for continuous education and development, teaching and learning – both in its headquarters and its stations all over the world.

All employees have access to a variety of soft skills training such as presentation skills and project management basics; courses that have proven to be very popular among the staff. The company also offers more complex programs dedicated to leadership and management, including the team leader program and the management development program. During 2016, Cargolux delivered an average of 64 hours of training per employee.

Cargolux is interested in knowing its people – what motivates them, what makes them unique and how the fit between the organization and individual career aspiration can be optimized. The company knows that only when people are happy at what they do, they will be able to utilize their full potential and perform at their best. In this way, training and development supports business continuity and increases individual job satisfaction.

Continuous development and transparent feedback improves competencies and performance, individually and as team. To support employees in this matter, Cargolux has designed an appraisal system for em­ployees with managerial function, based on reviewing main tasks and responsibilities, setting objectives, analyzing competencies and creating an individual career development plan. The system was rolled out to the airline’s global stations in early 2016.

In order to guarantee business continuity and matching organizational needs with individual career development, Cargolux has launched a project implementing a structured succession planning framework. To ensure undisrupted operations and to safeguard internal expert knowledge, Cargolux also works on implementing a global process that will enable the company to better recognize, develop and retain its talents.

Following regulatory changes and new requirements set forth by EASA, Cargolux, in 2016, restructured its crew training organization and created the Cargolux Flight Academy. The new organization was set up as a profit center that not only fulfills the pilot training requirements of the Cargolux Group, but also markets crew training capacity to third-party customers.

In contrast to other providers who mainly employ retired pilots, Cargolux’s trainers are active line pilots with an average of 15,000 flight hours and way over 20 years of 747 experience at Cargolux under their belt. In addition, as cargo pilots, Cargolux trainers are well versed in operating to demanding and difficult airfields in remote or less than ideal locations that passenger airlines usually don’t fly to.

When launch customer Cargolux introduced the Boeing 747-8F, it also introduced the world’s first 747-8F simulator and has since converted it to Level D status, the highest possible qualification. Cargolux, today, employs one of only four advanced 747-8 training units worldwide. Both Cargolux simulators, the 747-400F and 747-8F, are equipped with state-of-the-art visuals.

Together, both simulators recorded a utilization of 61%, or 10,490:16 hours in 2016. Of these, 6,480 hours were flown by Cargolux crews and 3,511 hours by external customer crews, including Cargolux Italia. Based on a 24-hour cycle, the 747-400 simulator was utilized for 67% of the time while the B747-8 Simulator had a slightly lower utilization rate of 56%.

In cooperation with Boeing and EASA, the Cargolux Flight Academy conducted the very first transition courses from the 747-400 to the 747-8; this led to an approved footprint for all such courses at other suppliers.

During 2016, 62 pilots went through the Flight Academy’s Course A, 56 of those were Cargolux pilots. ­In addition, 1 pilot went through Course C while 26 passed through a Command Course during their promotion to Captain.

The airline’s Flight Academy is the only approved training organization worldwide to offer 747 line training to third-party pilots. It also markets the capacity of Luxair’s new cabin training simulator to third parties.

In late 2015, Cargolux introduced the European Aviation Safety Agency’s (EASA) flight time limitation rules (FTL) ahead of its February 2016 deadline.
After its first full year in operation, the EASA FTL has proven to be a valid and important tool that, for the first time ever, not only looks at scheduled work hours but also takes into account the individual body clock of pilots.

A Safe Workplace

Disclosure on Management Approach

Cargolux strives to provide its employees with a safe and healthy workplace. The company wants to offer an environment where its employees feel comfortable and protected during their daily work. To this end, Cargolux has in place an effective health and safety management system and holds an OHSAS 18001 certification for its Health & Safety Department.

Safety at work

Work plays a central role in people’s lives who spend a large part of each day in the workplace. Given this, Cargolux believes that a work environment should not only be inspiring and conductive to creativity but also safe and healthy.

The Cargolux Occupational Health & Safety (OHS) Department has made efforts during 2016 to further promote health and safety awareness and developed a dedicated intranet site to promote safety practices among both employer and employee. Aimed at creating a system of continuous improvement, this intranet page is a new step forward in sharing information and promoting prevention.

The department supported the renewal of the OHSAS 18001 certification for the company’s Maintenance and Engineering Division and introduced an IQ SMS reporting tool. During the outbreak of the Zika virus, an awareness program was launched for Cargolux pilots travelling to the affected countries in support of health and safety for crews. The department furthermore welcomed a delegation of the European Commission that was interested in how Cargolux is applying EU regulations, particularly in risk areas.

In an ongoing campaign, OHS runs a sensitivity campaign aimed specifically at staff working in high-risk areas. Thanks to a continuous presence of OHS in these areas, the number of lost days for accidents decreased to 346. Lost days for sickness also decreased and reached 12,163.

On its way to achieving these goals, Cargolux has made significant investments. The airline, in 2016,concluded its fleet rollover program with the delivery of its 14th and final 747-8 freighter. In 2005, the company became Boeing’s launch customer for this aircraft type that was consequently developed with the input of Cargolux. The 747-8F, together with the 747-400F that Cargolux operates, allow the airline to lower the fuel consumption of its fleet, thus effectively reducing CO2 emissions.

Not ending here, Cargolux has initiated its Fuel Efficiency Round Table with encouraging results. In 2016, the initiative saved over US$ 1 million in fuel costs at Flight Operations alone. This translates to 2,031 tons of fuel that were saved in airline operation, which also reduced the fleet’s CO2 emission by 6,398 tons.

The savings became possible through operational measures such as different flap settings, lower APU usage or three-engine taxiing after landing. Other measures, such as the introduction of the electronic flight bag, helped to reduce weight by eliminating paper maps and introducing electronic maps in the cockpit. Initiatives in other departments complement the savings at Flight Operations. During 2016, the Fuel Efficiency Round Table implemented 13 fuel saving initiatives for Cargolux, 2 of those are now part of the company’s standard procedures while 11 initiatives are still running as such. Initiatives in other departments include APU usage and weight reductions at Ground Operations and Maintenance, the latter also introduced calendar-based engine washing on the 747-8F. Finally, Flight Operations Support initiated an opti­mized random routing, fair weather alternatives and statistical taxi fuel.

In 2016, the Fuel Efficiency Round Table achieved 97% of its targets for Flight Operations.

The Fuel Efficiency Round Table is a perfect example of cross-divisional projects within Cargolux. Even though it is a Flight Operations Initiative, many other departments contributed to its success.Maintenance, Engineering, Ground Operations, Network and Crew Training – everyone involved in the Fuel Efficiency Round Table is an expert in their field and promotes the project in their division and department. The initiative offers more potential savings for the company that directly translate to a lower environmental impact. It could reduce fuel burn based on block hour by another 0.5%, which means that 240 kgs of fuel can be saved on each Cargolux flight.

In total, the airline targets to reduce its fuel consumption at Flight Operations by 1,700 tons and company-wide by 3,800 tons in 2017.

Access to high-quality data is crucial when improving fuel efficiency. In order to achieve this, Cargolux has invested in Honeywell’s GoDirect software, formerly known as Aviaso. It is a technologically advanced fuel efficiency software that simplifies data gathering, analysis and reporting, helps identifying additional fuel savings and monitors the progress of existing fuel savings initiatives.

In June 2016, the company’s environmental efforts were validated as Cargolux, true to its pioneering spirit, became the first airline worldwide to be honored with the Lean & Green award. The airline was recognized for its commitment to improve its carbon efficiency by 10% within five years.

Lean & Green was started in 2008 as an initiative of the Dutch Ministry for Infrastructure and Environment to reduce the carbon footprints of companies. Today, Lean & Green Europe is Europe’s leading community for sustainable logistics. Lean & Green Europe combines corporate responsibility for reducing footprints with continuous improvement of operational performance and value for customers.

Until recently, logistics was perceived as a low-skill industry associated with a history of emissions and noise pollution. Due to the rapid introduction of green technologies, advanced automation, software systems and high tech advances in warehousing and tracking systems, as well as more collaboration in the supply chain, this perception is now outdated. Lean & Green Europe, with its award, recognized that Cargolux successfully faced the challenge of finding a healthy balance between environmental and economic concerns. The airline’s customers and logistics partners, the major forwarders of this world, are well aware of the Lean & Green program and appreciate Cargolux’s efforts. Being Lean & Green certainly gives Cargolux a competitive advantage and underlines its commitment to always deliver the highest service excellence.

The company continues a range of programs that support the reduction of greenhouse gas emissions for its fleet of aircraft. These include:

Deep core engine washing. This is performed on the GEnx-2B, CF6-80C2B5F and selected RB211-524H2-T engines with low N3 speed margin. Engines are washed at an interval of 500 cycles or about twice a year.

PIP – performance improvement package retrofitted to the GEnx engines of the airline’s early 747-8Fs.In 2016, four engines went through the PIP upgrade, it is planned to upgrade another 10 engines in 2017.

The airline group can show exemplary greenhouse gas emission intensity for its fleet of aircraft. Based on 11.3 million ATKs (available ton kilometers) for the Cargolux and Cargolux Italia fleets, the CO2 efficiency reached 0.331 kgs CO2 per ATK.

Scope 2

Cargolux offices and facilities recorded a CO2emission of 2,235 tonnes for fuel and gas heating during 2016.
Use of electricity emitted no CO2.

World trade, global economics, human healthcare and a decent standard of living rely on sustainable air freight transport. Cargolux firmly believes that achieving this goal requires the collaboration of all partners in the transport chain as well as aircraft and engine manufacturers and governments.

At the same time, Cargolux is aware that its activities affect the communities around the airports it operates from and strives to minimize the impact of these activities as much as possible.

The emission of noise is therefore an important area of environmental concern for the company, especially at the airline’s home base in Luxembourg where most of its aircraft movements take place.

Operating the world’s quietest freighter aircraft in its class, both the Boeing 747-400F and the 747-8F, represents a significant measurable improvement for the surrounding communities. Introducing the 747-8F in particular, with its advanced engine technology and new wing design, reduced the 85db take-off noise footprint around airports by another 30%.
Both aircraft types in the Cargolux fleet fully comply with the standards of ICAO chapter 4, the most stringent aviation standard.

Additionally, over the past years, the company studied and implemented a number of operating procedures to further reduce community noise with its existing fleet.

These include a ‘Constant Descend Approach, developed in coordination with the DAC, that reduces noise disturbances over the approach sector to Luxembourg airport by following a continuous descend path all the way down to runway level. It minimizes the thrust required for the approach, as engines do not have to be spooled up for renewed level flight in a stepped approach.

Revised flap settings during the approach also reduces the amount of thrust engines have to deliver for landing. Landings in Luxembourg are limited to idle reverse thrust to reduce noise levels.

After landing, Cargolux aircraft shut down one of the four engines for three-engine taxying to the parking position to conserve fuel and lower the noise level.

The aircraft’s auxiliary power unit (APU) is not used for arrivals in Luxembourg to reduce the noise on the ramp. Instead of the APU, a ground power unit is used to supply electricity to the aircraft.

The airline is also studying a quiet climb procedure after take-off from Luxembourg airport that incorpo­rates a climb to a certain level before reducing engine thrust while overflying noise-sensitive areas.
At a given height, thrust is then restored to climb thrust. This procedure would be applicable to the company’s new fleet of 747-8 freighters.

Cargolux runs a waste management system that enables the company to better control and segregate the waste it generates in Luxembourg. This system is operated by a spe­cialized external company, managing and monitoring the correct collection, segregation and disposal of all categories of waste, including recyclables and hazardous waste.

Recycling is an important factor in the company’s waste management system. All facilities and rented offices in Luxembourg are equipped with a waste-sorting and recycling system. Wastewater from the airline’s maintenance operations and maintenance facilities in Luxembourg are directly collected by the airport sewage system followed by a wastewater treatment plant.

In addition, the company encourages its office staff to adopt measures that cut down on waste production, including the use of electronic storage for documents, electronic communication methods or greater use of recycled paper.

During 2016, the amount of recyclable waste grew by 23.03% while oily waste and residual waste declined by 8.12% and 6.20% respectively. The growth in hazardous waste was due to an unscheduled cleaning of one oil separator that resulted in the disposal of large quantities of oil contaminated water.

The overall amount of waste produced by Cargolux in 2016 went up by 14.63%. The growth in waste was driven by increased maintenance activities due to the higher fleet utilization, especially during the peak season, as well as the disposal of accumulated wood and steel waste at the maintenance center. The higher-than-before aircraft utilization also resulted in the disposal of more end-of-life tires than in the previous year.

The company handles oil-contaminated waste with an innovative oil absorber product as well as waste compactors that have the added benefit of reducing transportation costs and emissions that would otherwise result from the waste disposal process. The Cargolux Maintenance Center recorded no spills during the year while only one spill was recorded at the Cargo Center’s tarmac.

Cargolux’s waste management system holds the ‘Superdreckskescht fir Betriber’ environmental label. The next audit to retain this label will take place during 2017.

AT A GLANCE

Key figures

26 747 freighters: 14 747-8F, 10 747-400F, 2 747-400ERF

Average age of the fleet on 31 December 2016: 7.0 years

Fuel & Emissions

One of the best carbon footprint in its class

Jet fuel 1 consumption: 189,381.62 tonnes

CO2 emissions: 3,746,552.05 tonnes CO2

Carbon footprint: CO2 footprint: 497 gr/FTK

Noise

One of the best noise footprint in its class

100% of the Cargolux fleet is compliant with ICAO
Chapter 4

Waste

Waste : 21.5% of produced waste is recyclable (Luxembourg only)

GENERAL DISCLOSURES – COMMUNITY SUPPORT

As an investment in the future, Cargolux seeks to sponsor the next generation of air cargo professionals through a close cooperation with schools and institutes in Luxembourg. The airline has, for instance, a long-term, close cooperative relationship with the Lycée Technique Privé Emile Metz (LTPEM) in Luxembourg for an aircraft mechanic apprenticeship program.

Cargolux has traditionally put a strong emphasis on supporting future professionals and has participated in a range of initiatives in 2016 that included visits to schools and events that give youngsters the chance to explore job opportunities and career paths. With these activities, students can sample first-hand experience and impressions on the various aspects of the daily work life and learn about requirements and opportunities for a career in the air freight industry.

In addition, Cargolux continues its support of local artists and cultural institutions, as well as humanitarian causes through its cooperation with non-governmental organizations that help people in need.

Cargolux focusses on securing a motivated and highly qualified workforce for its present and future activities. To this end, the airline seeks to support young people in Luxembourg in their career choices and decisions. Throughout 2016, the Cargolux Human Resources (HR) team performed 13 company presentations that included visits to schools and participation at the local Girls and Boys Day. The team also attended six events for job seekers, presenting openings and career opportunities at the airline. During 2016, the company welcomed 41 trainees and offered 6 CIE contracts in collaboration with ADEM, the Luxembourg government’s employment agency.

The company maintains its cooperation and close relationship with the Lycée Technique Privé Emile Metz (LTPEM) in Luxembourg that runs an aircraft mechanics apprenticeship program. Students that successfully pass their exam become B.1.1-licensed AML aircraft mechanics with an opportunity to gain employment at Cargolux. B.1.1-licensed mechanics are certified to perform mechanical and/or avionic works during base and line maintenance.

Graduates from Luxembourg’s AML apprentice scheme obtain a license in accordance with EASA regulations, Part 66. After obtaining the AML, the junior mechanics have to complete an in-house type rating training for the 747-400F and 747-8F aircraft in order to be fully licensed to work on Cargolux aircraft.

In another successful year for the technical training organization, Cargolux, in 2016, employed five students in their first year of apprenticeship and five, including one female, students in their second year. The practical part of the apprenticeship takes place in Cargolux’s own workshops. This not only applies to Cargolux students, but, in the frame of enhanced synergies between Cargolux and Luxair, also to students at Luxembourg’s national carrier, who has three each in their first and second year of apprenticeship.

Cargolux not only seeks to support young people in their career search but also puts efforts into making space available for humanitarian causes by supporting NGOs who bring relief aid and medical goods to people affected by epidemics and natural disasters.

In 2016, ten FOC shipments were flown, many of those to African countries. Cargolux also continued its long-standing support of the International Bazaar, one of Luxembourg’s major annual charity events that brings together volunteers from over 50 nations to sell goods and specialties from their home countries. The proceeds from these sales are distributed among a wide number of larger and smaller aid and relief projects throughout the world. In 2016, Cargolux supported the stands of South Africa, Hungary and the USA.

Charity and social support are not only close to the company’s heart, but also the employees’. In 2016, the Cargolux staff sports clubs supported the ‘Fondation Hellef fir kriibskrank Kanner’, a local organization supporting children suffering from cancer or other life threatening diseases and their families. In addition, a group of employees participated in a charity sport event organized by the international section of the Red Cross in Luxembourg, held in support of local charity organizations.

In another 2016 project, Cargolux agreed to a yearly financial allocation to the Luxembourg environmental foundation Hëllef fir d’Natur to sponsor the acquisition of a woodland area and its transformation into a protected nature reserve that helps to safeguard the natural heritage and biodiversity in Luxembourg. This sponsorship runs for three years.

As a company firmly rooted in the Grand Duchy of Luxembourg, Cargolux believes it is important to support and promote Luxembourg’s cultural activities. With a worldwide presence, Cargolux is in a perfect position to enrich the cultural life of its home country and to support Luxembourg artists in their international exposure. This support is strongly anchored in Cargolux’s ambitions and the role it wants to play as a good citizen.

In 2016, Cargolux and Luxembourg Museum of Modern Art, MUDAM, have renewed their partnership agreement for another three years. Cargolux has a long-standing sponsorship agreement with MUDAM and regularly flies paintings, objects and other artworks for the museum’s exhibitions, mostly between Europe, the United States and Asia. Because transportation usually represents a large part of an exhibition’s costs, Cargolux’s support contributes to tip the balance towards a successful completion of such projects and constitutes an essential logistical link between MUDAM and other museums around the world.

Cargolux has a longstanding expertise in flying artworks and valuable goods and its CV Precious product not only meets the highest security standards, but sets them. Logistical planning around an art exhibition does not start with the transport and, due to the size and bulkiness of the artworks, the feasibility of an exhibition becomes increasingly dependent on Cargolux’s support and ample experience in the field of art transportation.

GENERAL DISCLOSURES – CUSTOMER CARE

Cargolux strongly believes in service excellence, personal contact and detailed attention to customer needs as a foundation for a successful business built on cooperation and trust. With its activities, the airline seeks to boost the businesses and economic success of its partners. This has earned Cargolux a high level of trust and loyalty from its customers and business partners in the industry. Many of these long-lasting partnerships have grown over decades and Cargolux is proud that its efforts are recognized with the many industry awards it receives.

2016 was Cargolux’s ‘Year of the Customer’. However, the airline’s efforts in enhancing its customer experience are ongoing as every year is first and foremost a ‘Year of the Customer’. This was underlined by Cargolux’s ‘Powered By’ initiative that honors its top customers by adding their names and logos to the livery of its aircraft. With this gesture, Cargolux stresses the importance of its successful long-term relations with several of the world’s leading freight forwarders who play an important role in the global supply chains and who continue to power Cargolux’s success. It is also a sign of friendship and the strengthening of common goals.

Cargolux was the first airline worldwide to receive the Good Distribution Practice (GDP) certification that attests that Cargolux’s management system meets the requirements of the EU directive ‘Guidelines on Good Distribution Practice of Medical Products for Human Use’, as well as World Health Organization guidelines.

Reflecting this expertise in its CV Pharma product, one of eight specialized offerings in its product portfolio, makes Cargolux a preferred carrier for the transport of pharmaceutical goods and underlines the company’s commitment to the safe and fast movement of high-value, temperature-sensitive healthcare shipments across its global network.

In January 2016, Cargolux successfully passed its GDP Surveillance Audit, validating its GDP certification for another year.

To support a positive customer experience, the company established its Global Accounts Team that became fully operational in 2016. The team focused its attention on dedicated customer contacts in order to guarantee short reaction times to requests and market developments. The airline’s Pricing Department also played an important role in customer relations and served the organization with enhanced data and information. The Product Team members were able to help customers with special cargo requirements and tailor-made solution for specific needs.

Speaking of products, Cargolux expanded its port­folio in June 2016 with two new additions, CV Select and CV Select+. These two features act as an ad­ditional layer in combination with any of the eight existing products.

The two additions present customers with a number of unique advantages. CV Select features preferred access to premium capacity and booking commitment, all combined with the airline’s long-standing expertise and detailed attention to the specificities of different commodities. In addition, CV Select+ gives vastly reduced cut-off times of only 30 minutes before departure that customers’ shipments can arrive at the airport.

Cargolux’s CV Select and CV Select+ offers guaranteed access to the schedules that suit customers and their clients. With both options, Cargolux can guarantee full, optimal airport-to-airport service and real-time track and trace updates.

Also in June, Cargolux launched a new and updated website that greatly enhanced the customer experience with features, such as track and trace, that provides customers with the most accurate and up-to-date information in a particularly user-friendly way. The new site is optimized for mobile devices and offers five sub-sites with easy navigation that gives direct access to e-services as well as sales or maintenance-related information and fast points of contact.

As an additional communications tool, the company launched a new customer print magazine during 2016, ‘Charlie Victor’, that gives outsiders a glimpse into the world of Cargolux. The airline believes that close personal contact with its partners, as well as detailed attention and an understanding of the customers’ needs forms the foundation of a superior service offering and is central to what makes Cargolux different. The name ‘Charlie Victor’ refers to Cargolux’s IATA code CV, which, in NATO alphabet, spells Charlie Victor.

About this report

This report provides information for the calendar year 2016. The previous report was published in April 2016. It is published annually.

Its elaboration is based on the continued analysis of the company’s main impact and responsibilities, both with regard to the environment and society, and relative to the concerns raised by key groups of stakeholders in this area.

The 2016 report describes the company’s efforts in a context where priorities were given to competing in the difficult market environment that challenged Cargolux and the global air cargo industry. Despite these difficulties, Cargolux took care to uphold its commitment to environmental and social issues and developed them even further.

This report is prepared in accordance with the CORE requirements of the GRI Standards guidelines of the Global Reporting Initiatives. Cargolux endeavors to constantly review and further elaborate its Corporate Social Responsibility program and the Sustainability Reporting Process.

This report pertains to Cargolux’s operations and geographical presence overall, except where otherwise specified in the report. Certain indicators cover its Luxembourg-based activities only. These include figures relating the company’s employees as well as data related to occupational health and safety. Data monitoring the company’s waste disposal also relates to its facilities in Luxembourg only. The report does not cover the activities of separate legal entities fully or partly owned by Cargolux. Monitoring of fuel consumption and CO2 emissions includes the data collected by Cargolux Italia.

Contact point

Cargolux invites all interested parties to enter into dialogue about its sustainability policy, its activities and this report. The company’s policy, further information about its activities and previous reports can be found on its website athttp://www.cargolux.com/about-us/corporate-responsability. All comments and enquiries are welcome and can be forwarded through the contact form on the aforementioned webpage, or by writing to corpcom@cargolux.com.

APPENDIX SOCIAL AND ENVIRONMENT

GRI CONTENT INDEX

AT A GLANCE

HIGHLIGHTS
CONSOLIDATED FIGURES

CORPORATE GOVERNANCE

As at April 26, 2017

Board of Directors

Luxair representatives

Paul HelmingerChairman of the Board of Cargolux
Chairman of the Board, Luxair Group
Director